Primus picks up AOL7, puts float on hold

Seven Network, America Online and AAPT have sold their money-losing internet venture, AOL7, to Primus Telecommunications.

The acquisition may have pushed Primus's plans for a float to the backburner as it will have its hands full absorbing a business which has accumulated losses totalling $120.9 million up to the end of June, 2003.

These include a $29.7 million loss for financial 2003, on revenues of $40.7 million.

AOL7 confirmed that loans from the three shareholders totalling $144.7 million have been extinguished.

These included a $100 million loan from AAPT, which said it wrote off the full amount of its investment in AOL7 during the 2002 financial year.

Seven said it expected to receive "cash funding" of more than $23 million for the sale, slightly less than the current book value of its investment.

AOL7's chairman Steve Wise was also putting a positive spin on the transaction: "Everyone has got something of value out of this," he said.

AOL7 would not say how many of its 140 staff would keep their jobs but Primus managing director Greg Wilson said there were "no plans for mass redundancies".

Primus said it would add AOL7's 90,000 internet customers to its 400,000 subscribers but would run the business as a stand-alone operation retaining AOL's branding and content.

Mr Wilson said the company would start cross-selling its other telecom services to the new customer base.

"This is an exciting opportunity for Primus Telecom," he said. But he backed away from earlier talk of a float in the first half of 2004, stating that the company would list when it was ready.

Analysts have estimated Primus could be worth up to $600 million but the loss-making acquisition could put a big dent in the appeal of Primus, which reported another stellar result for the 2003 financial year just ended.

Primus said income from operations was up 70 per cent to $56.5 million for the year ending December 31, 2003, while revenues were up 8 per cent to $532 million from the prior year.

US parent Primus Telecommunications reported net profit of $US55 million ($70.5 million), on revenues of $US1.3 billion for 2003-03.